New Economy

Two Companies at Odds Over the Internets Future

By STEVE LOHR

Published: October 27, 2003

ONE year ago, almost to the day, Samuel J. Palmisano, the chief executive of I.B.M. , delivered a speech in New York that sketched his company's vision of the future of computing, which he called "on-demand computing."

Today in Los Angeles, Bill Gates, the chairman of the Microsoft Corporation , will present his company's notion of where things are headed, which the software maker calls "seamless computing."

Behind the marketing shorthand is a kind of war of ideas over what can be thought of as "the Internet, Act II," a technological evolution that has been gathering speed. The next-generation development of the Internet has been helped by the continuing and remarkable progress in hardware. But probably more important has been the embrace of a set of software standards - rendered in a nerdy alphabet soup of acronyms, like XML, SOAP, WSDL, UDDI and so on - that open the door to widespread machine-to-machine communication across the Internet.

Over the last couple of years, I.B.M. and Microsoft have cooperated closely to reach agreement on the software standards, known as Web services, necessary for this next step. The two companies, however, agree on little else.

The Internet Act I was mainly about e-mail programs and downloading digital information to look at or listen to - Web pages, animations, video and music. Act II should bring all kinds of automated transactions among businesses and individuals. And those transactions will be able to include a hint of computer-aided intelligence.

An example could be arranging an appointment with your dentist. Your calendar information, with stated time preferences and availability, exchanges data with your dentist's calendar to automatically set up an appointment. Similarly, companies should someday be able to conduct computer-automated auctions with suppliers. The next-generation Internet can be thought of as the beginning of what researchers have said might be possible with software agents, or bots, performing as human assistants.

To be sure, many companies, including the Hewlett-Packard Company , the Oracle Corporation and Sun Microsystems , have strategies and marketing campaigns for pursuing this next stage of computing. Still, I.B.M. and Microsoft are the two with the greatest influence.

The Microsoft vision centers on the individual and technology tools, foreseeing a kind of rerun of the personal computer revolution in the Internet era. I.B.M. sees the computing evolution as helping to free companies from the previous constraints of technology, so they can focus more on using technology to streamline business processes and seek new markets than on the hardware and software itself. One implication, I.B.M. says, is that companies need not have so much internal technology. Instead, they can buy computing and technology services from outside suppliers like I.B.M., almost as if a utility, paying only for what they use, on demand.

Their separate paths provide plenty of grist for debate. Microsoft portrays the I.B.M. strategy as trying to exploit a post-bubble loss of enthusiasm for technology and persuade companies to hand over their computing chores to I.B.M. But when technology goes out the door, Microsoft insists, so do opportunities.

"I.B.M. is talking about taking all the things we do now and outsourcing it," Mr. Gates said last week in an interview. "The utility model suggests that it is not about empowerment."

Microsoft executives compare the first stage of the Internet to the mainframe era, with the Web server computer the equivalent of the mainframe and the browser as the equivalent of the simple, "dumb" terminal of the mainframe days. The personal computer, they say, brought an explosion of creativity and opportunity as millions of people began using computers and programming themselves. Some were professionals, they note, but many others were ordinary people using the simple programming tools in a spreadsheet, for example, to simulate and test new ideas for a business.

The next stage of computing, employing the Web services software standards, will do the same thing for the Internet, Microsoft executives say. "The Internet will be programmable," Microsoft's chief technical officer, Craig Mundie, said. "And there's no reason why the bulk of humanity won't be able to apply the tools we're talking about to this new world."

Some 7,000 people have registered to attend Microsoft's professional developers conference, which begins today in Los Angeles. The turnout is a record, Microsoft says. The computer professionals will be shown glimpses of Microsoft's next version of Windows, named Longhorn, which will be built using Web services standards. Microsoft has not said when Longhorn will be ready, but it is not expected to be shipped until 2006.

Microsoft will not announce a shipment date at the conference. "This is a technology-driven release, not a date-driven release," Mr. Gates said.

At the conference, Microsoft will show the professional programmers a set of development tools, called Indigo, intended to allow a programmer to write a Web services application once that can then run on several devices - a PC, a hand-held device, a cellphone or whatever. This is Microsoft's notion of seamless computing. The devices need not be running Microsoft software, in the same way that e-mail messages can be sent and received by people using different e-mail programs.

But, of course, the Microsoft message is that the preferred technology for building and experiencing the next generation of the Internet is Windows.

The Windows-centric strategy, I.B.M. executives say, is increasingly out of step in a computing world moving toward technical diversity and open standards not owned by any one company.

"Microsoft today reminds me of I.B.M. in the years from 1988 to 1990," said Irving Wladawsky-Berger, vice president for technology and strategy at I.B.M. "We were doing lots of things but the No. 1 thing was to protect the mainframe franchise."

"Windows will continue to be a superb legacy business, just as the mainframe is for us," Mr. Wladawsky-Berger said. "It's just that the dynamics change."

The essence of on-demand computing, he said, is to "finally liberate business from the shackles of technology." Using open computing standards as building blocks, he explained, complex technological tasks can be broken down and solved in new ways, almost automatically. For example, he said, cars covered with sensors, all connected to the Internet, could automatically summon software to remedy a mechanical problem before the car malfunctions, reducing warranty costs and perhaps accidents.

I.B.M. clashes with Microsoft not least because I.B.M. is the leading corporate backer of the free Linux operating system, a direct challenge to Microsoft. I.B.M. regards the spread of Linux as part of the inevitable market of open technology standards.

"I regard it almost as a law of nature that anytime an Internet-based standard is good enough, it will take over the volume business from the proprietary standard," Mr. Wladawsky-Berger said. He sees Linux as that kind of Internet-based standard.